Bankruptcy in Melbourne is a challenging task, but I recognize from meeting with thousands dealing with the possibility of insolvency over the years that the most frightening aspect is the concern of losing the family residence.
Almost everyone is on an emotional degree attached to their home – it’s where the kids have grown, it’s where you sleep, eat, unwind and built it from a house to a home. So it is terrifying to feel that something like insolvency can sweep in and take all of that from you.
So, Will you lose your home if you declare bankruptcy?
My response is ‘maybe’– I realise it is not a helpful reply, but it will really based upon your specific conditions. People usually think that losing your home is unavoidable and just another part of Bankruptcy– but don’t make yourself mad just yet, because there might be hope.
So how does personal bankruptcy view my house?
The first thing to know is that houses are deemed assets– but no two houses will be the same. What you need to be aware of is that whenever it comes to Bankruptcy, they designate a trustee to oversee the process. Their job is to make certain that they can pay off as much of your financial debts with your asset. This is performed via equity– and if there is no equity in your house then there is no real benefit to selling it.
Trustees not selling houses is occurring increasingly more since the GFC as house prices in many locations have been heading south so what you paid 4 years ago may not immediately reflect the price nowadays.
But the biggest part with Melbourne and Bankruptcy is that you really should get a professional to assist you with this procedure, there are plenty of variables in these situations that should be taken into consideration.
For example, if you have no equity in your property you need to think about your home loan. With loans, you are essentially just a client of the financial institution and they will similarly have a choice– will they wish to take your home back, or do they want you to keep the home loan? You might feel that they would want to just take your home to steer clear of the risk, but honestly banks are run as a business, and if these guys can leave you with a mortgage to keep generating income off you, they generally will provided that you keep up to date with your monthly payments. But it is nonetheless up to the trustee to determine that there is a lot of equity in your property the trustee will force you and the bank to sell your home.
What is my house worth?
Typically with Bankruptcy it is hard to know what your house is really worth– indeed, you may have an idea if you were selling off your house, but the manner in which this is worked out in bankruptcy is typically different. When you file for insolvency you will have to note down the value of your home, and the amount of money that you owe– and you can figure this out by using a valuer. This is going to be far more precise than using your ‘gut feel’ or a real estate agent. The other important factor is that you should ask your valuer for two prices– one for a Quick Sale, and one for a non-time sensitive sale. This will give you 2 realistic numbers that can guide you to effectively value the property and understand its worth even if you are being pressured to sell swiftly.
When it comes to Bankruptcy and homes, an additional major factor to consider is ownership, in many cases homes are purchased in shared titles. In other words a couple may have bought a house 50/50 utilizing both salaries to make the repayments. If one party declares bankruptcy and the other party does not, the equity is only factored on the 50 % of the property. With Bankruptcy, this is merely one of possibly various situations that are probable when it is in regards to the family home. Remember the non-bankrupt party can purchase the bankrupt’s part of the home in bankruptcy too. I must repeat this but get some advice on this area of Bankruptcy given that it is very tricky and each and every situation is different.
If you really would like to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then do not hesitate to reach out to Bankruptcy Melbourne on 1300 795 575, or visit our website: www.bankruptcymelbourne.com.au.